A fund manager who has been around the block many times confidently predicted a week ago that the shift to market-determined interest rates in the United States would cause market disruptions similar to travelling through the sound barrier.

There would be a big bang followed by a return to calm conditions.

His prediction about the first part proved accurate as equity, fixed interest and commodity markets around the world were hit hard from the decision by the US Federal Reserve Board to finally end its $US85 billion monthly asset purchases in 2014.

The Fed’s withdrawal from the US bond markets means that interest rates will be set by market forces. The so-called risk free rate of return, which is the interest rate on government bonds, will no longer be set by artificial means.

The world’s biggest economy will have to stand on its own two feet for the first time since the global financial crisis hit in 2008. This has ramifications for any interest rate-sensitive stocks. Also, it is not clear when market will return to “calm conditions".

Some would argue that because all asset classes are valued relative to the risk free rate, which has jumped from 1.6 per cent to 2.5 per cent in the US in the space of six weeks, every investment will be impacted by the US central bank pulling back from its years of market support.

Inevitably, the developments in the US have flowed through to Australia. The equity markets were shaken but the most telling impact has been in the currency market.

Trading in Australian dollars relative to the US dollar is the fourth-largest in the world for currencies traded against the US dollar. It is the largest market in Australia and it is loosely regulated.

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It has proven to be a reliable shock absorber whenever the world has been in financial turmoil. That is proving to be the case again. The 13 per cent fall in the Australian dollar over the past six weeks is hugely significant for share investors.

Further declines will lift the earnings of companies with overseas operations or with earnings in US dollars. Also, it will have implications for companies that import goods purchased in foreign currencies.

Chanticleer would argue that any further sharp downward moves in the currency should force publicly listed companies with dollar senstive earnings to make clarifying comments to the market.

In some cases a US1¢ move in the exchange rate can translate to tens of millions of dollars in additional earnings.

The Australian equity market overall has been relatively unscathed by the tectonic shift in US interest rate markets. More than 30 companies in the S&P ASX 200 hit 12 month lows on Friday but the overrall market only fell 0.41 per cent.

However, there is one sector of the market that is suffering in a big way from the change in market conditions in recent months - the junior miners.

Many junior miners are trading at significant discounts to their cash backing. It is not unusual to find companies with market values equal to half or one third the value of the cash they hold.

Glyn Davis, vice-chancellor and principal of Melbourne University, looks to have completely outsmarted the Society for Knowledge Economics (SKE). which spent the past seven years building support for a Centre for Workplace Leadership.

When Workplace Minister
Bill Shorten
announced the winner of the tender for the new centre, it went to Melbourne University. Davis made the clever move of offering $5 million in funding to win the $12 million government grant to establish and run the new centre.

It is a severe blow to
Steve Vamos
at SKE. Vamos and his team have good reason to be disappointed. SKE had the necessary credentials for developing a new approach to lifting workplace productivity.

It was backed by 20 to 30 companies and had the support of about a dozen universities as well as leading industry groups.

What it did not have was the support of the Australian Council of Trade Unions.

Over the past seven years, SKE has tried to carve out a different approach to developing workplace relations. It encouraged a direct dialogue between bosses and workers.

This posed a threat to the power and influence of the union movement, which will play a key role in the Melbourne University-run centre.

SKE issued a press release on Friday congratulating Melbourne University on its victory.

But the statement by Vamos included some sentiments that could well be used to judge the success of the centre.

Vamos said: “The world has a plethora of research and training programs to build leadership, culture and management practices and thinking."

“These programs will continue to have limited broad-scale impact unless they are supported by a significant campaign to move the thinking in our workplaces away from control-oriented, mistake-averse, know-it-all attitudes to those that enable people to be at their best, willing to try new things, and open to learning."

SKE will probably shut down when its funding runs out it in September."